That thought has crossed the minds of many Indian entrepreneurs, especially those eyeing global markets. But before you jump the gun, let’s see if this move is truly worth it!
In today’s hyper-competitive startup ecosystem, founders are always looking for ways to attract investors, save taxes, and scale faster. Registering abroad sounds like a magic pill, but is it true? Or will it just burn a hole in your pocket?
Curious about whether going global is a smart move or a costly distraction? Keep reading!
The Allure of Registering Abroad (But Here’s the Catch)
1. Access to Global Investors:
Want top-tier international investors to take you seriously? Incorporating in Delaware or Singapore might do the trick! Many global VCs prefer companies registered in familiar jurisdictions.
While this might make it easier to raise funds, managing compliance across multiple countries can be complex and expensive.
2. Simplified Exit Strategy:
Startups planning for acquisitions or IPOs often prefer jurisdictions like Singapore and the USA for their established exit frameworks. “Mergers, acquisitions, and public listings? Much easier when you’re where the big players are!”
Unless your startup is already gearing up for a global exit, this might be unnecessary and premature.
3. Favorable Tax Regimes:
Lower taxes? Sign me up! Some foreign jurisdictions offer attractive tax benefits:
- Singapore: Corporate tax rate of 17%, with additional exemptions for new companies.
- UAE: No corporate tax on most business activities.
Lower taxes sound great, but if your main revenue source is in India, you might still have to deal with dual taxation.
But Wait… There’s More to Consider
Sure, registering abroad sounds fancy, but it’s not all smooth sailing. Here’s what founders need to watch out for!
Challenges of Registering Abroad:
- Dual Compliance Burden: Even if you’re registered in Singapore, if your operations are in India, you still have to follow Indian regulations. It’s like juggling two rulebooks at once!
- High Setup and Maintenance Costs: Registering abroad isn’t cheap. Legal fees, incorporation costs, annual filings, ka-ching! It can quickly add up.
- Limited Access to Indian Market Benefits: Indian government incentives like Startup India tax exemptions and easier access to local funding won’t apply if you register abroad. Missing out on these benefits can be a big deal, especially for early-stage startups.
Quantifying the Costs and Benefits: Let’s take a hypothetical scenario to better understand the implications
Case Study: A startup registered in Singapore but operating in India incurs:
- Setup Cost: $5,000 (approx. ₹4 lakh) for incorporation and legal fees.
- Annual Maintenance Cost: $2,000 (approx. ₹1.6 lakh) for filings and audits.
- Tax Savings: Potentially lower taxes abroad, but with dual compliance, actual savings may vary.
This shows that unless you’re raising significant foreign funds or targeting global markets, local registration might be more practical.
Legal Framework and Compliance Steps
If you’re considering registering abroad, here are key steps to follow:
- Choose the Right Jurisdiction: Research tax laws, investor preferences, and ease of doing business.
- Incorporation: File necessary documents, appoint directors, and register the company.
- Compliance Management: Ensure timely filings and dual compliance with Indian regulations.
How Coinshell can help you go global?
- Strategic Advisory: We’ll help you decide if registering abroad is the right move for your startup.
- End-to-End Incorporation Support: From documentation to incorporation, we handle it all.
- Dual Compliance Management: Ensuring you stay compliant with both Indian and foreign regulations.
